The Daily Kanban has obtained Tesla’s application [PDF here] to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) for about $100m worth of Sales and Use Tax Exclusion (STE) on its purchase of about $1.2 billion worth of production equipment to be used to produce its affordable Model 3. An analysis of key unredacted portions of this CAEATFA application shows that this massive investment –along with CAEATFA documents related to Tesla’s expansion of Model S and Model X vehicle production— will only increase the electric automaker’s annual production to between 230,000 and 300,000 units per year, well short of the firm’s 500,000 unit per year goal for 2018.

Though Tesla could reach its much-discussed half-million per year production goal through other means, these CAEATFA documents appear to validate Daily Kanban‘s analysis of air quality permits at Tesla’s Fremont plant which indicates a current production limit of about 230,000 units per year. Tesla has yet to publicize any plans to apply for the new permits or make the new investments required to bring its production rate beyond these limits and towards its planned 2018 rate of 500,000 units per year.

Throughout its history, Tesla has always been a company that is looking ahead. Even when the company was hand-assembling tiny volumes of Roadsters, CEO Elon Musk’s “Top Secret Master Plan pointed the way towards lower prices and higher volume. Now, with two vehicles on the market and annual production volumes moving towards the six-figure mark, Musk told analysts on Tesla’s most recent earnings call that lower-cost, higher-volume Model 3 is “overwhelmingly our focus.” As for the Model S and Model X, Tesla’s so-called “Gen 2 vehicles,” Musk says “things feel really quite stable.”

That doesn’t mean that Tesla is done investing in its current lineup, however. In fact, the electric automaker’s latest approved application for sales and use tax exclusion (STE) from the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) [PDF of CAEATFA’s staff report here] reveals that it is actually spending nearly half a billion dollars in order to expand the production capacity of its Gen 2 vehicles to 195,000 units per year by approximately 2021.

As the maker of tailpipe-free electric vehicles, Tesla is perhaps the last auto manufacturer you’d expect to struggle with an NOx emissions problem. Yet like any other auto manufacturer, Tesla operates factories which produce a variety of emissions including the NOx carcinogens at the center of the recent Volkswagen scandal. In fact, Dailykanban has discovered that Tesla has self-reported an NOx noncompliance at its Fremont, CA factory that may be contributing to delays in the production of the firm’s new Model X SUV.

Tesla plans to localize production and engineering in China, CEO Elon Musk told China’s state-owned news agency Xinhua today. When Tesla’s Elon Musk visits a foreign country, he usually drops a hint of building a plant there, probably hoping that the locals go as gaga as the governors of U.S. states. Musk arrived in China to speak at the Boao Forum, China’s answer to Davos. Localization would be possible in three years, Musk said. He wisely did not say it will happen in three years. It won’t. [Continue Reading]

I met a traveller from an antique land Who said: “Two vast and trunkless legs of stone Stand in the desert. Near them, on the sand, Half sunk, a shattered visage lies, whose frown, And wrinkled lip, and sneer of cold command, Tell that its sculptor well those passions read Which yet survive, stamped on these lifeless things, The hand that mocked them and the heart that fed: And on the pedestal these words appear: ‘My name is Ozymandias, king of kings: Look on my works, ye Mighty, and despair!’ Nothing beside remains. Round the decay Of that colossal wreck, boundless and bare The lone and level sands stretch far away ~Shelley, “Ozymandias”

Ed note: Jordan Terry of Stone Street Advisors recently asked me on Twitter what I thought of the “bad” situation at GM Korea, noting that it seemed “underreported.” Having written about the subject in the past at TTAC, that was hardly a surprise: not much hard reporting comes out of GM’s “International Operations” black box. That said, there is a broader context here that is underreported, and which I will try to lay out here…

General Motors Korea, formerly GM-Daewoo, has been a key design, engineering and export hub for GM’s global empire since the early 2000s. Specializing in smaller cars, developed and produced at lower price points than GM’s European Opel division, GM Korea was the main conduit for many of GM’s developing-market efforts, as well as the “home room” for many global products. For the perennially small-car- and cost-challenged GM, Korea was the key to offering affordable small cars for export to developed markets like the US and Europe in complete form, as well as in the form of CKD kits for developing market operations like GM Uzbekistan and GM Egypt.

But GM Korea’s long-term problems with union unrest, currency volatility and domestic market sales declines are catching up to it, creating a financial crisis just as it becomes increasingly expendable to the GM Mothership. GM’s deep alliance with China’s SAIC Motors has made GM Korea all but irrelevant to its strategy, and as The General plots its increasingly China-centric future it’s clear that Korea is losing out. With the loss of key export markets and future development work, GM’s once-crucial Korean empire is fading into obscurity and financial woes.

Of all global automakers, Mazda may be in the toughest position. As if it weren’t hard enough to be one of the smallest independent mainstream automakers left, it faces the thankless task of marketing an enthusiast-oriented brand as well. And without the support of a major partner now that Ford has departed its alliance with the Hiroshima-based automaker, Mazda is hustling to stay in the game. But the hottest fires produce the hardest metals, to borrow a phrase used more by marketing types than engineers, and Mazda’s fight for existence is producing some interesting innovations. As Dave Coleman, vehicle development engineer at Mazda’s North American Operations tells Wards Auto:

“We needed to approach that fundamental truth (of economies of scale) and find out if it’s still fundamentally true, or is there a way to engineer our way around it. And it turns out there is a way to engineer around it.”

A worker at VW’s Chattanooga plant answers questions from the author during a plant tour in 2011.

When United Auto Workers President Bob King staked the future of his union on a campaign to organize a transplant auto factory, the desperation was palpable. Decades of membership decline culminating in the drama of GM and Chrysler’s bankruptcy-bailout had left the UAW reeling. Few observers gave the union, which hadn’t organized a transplant auto factory in the US since 1978, much chance of success.

Now the UAW stands at the brink of a historical act of redemption, having all but claimed victory in the drive to organize Volkswagen’s Chattanooga, TN plant. While we wait to see whether that claim holds up, it’s worth examining a few intriguing but undercovered aspects of this case and assess what the impact of a resurgent UAW could be.